After years of artistic uncertainty and murderous internal strife, is English National Opera finding a role as a disseminator of new ideas? While the New York Met joins the ranks of theatres picking up ENO shows, its artistic director John Berry is unveiling the fruits of a new collaboration with the Young Vic, the first of which puts David Lynch's film noir Lost Highway through an extraordinary theatrical reworking.

This is a film about what psychiatrists call "dissociative fugue", that stress-bred state in which a person unconsciously changes identity to escape some unbearable trauma; in this case, the guilt of a murderer.

Director Diane Paulus's production is set to a score by Olga Neuwirth, which has been lauded as challenging our perceptions of opera, and which in Paulus's view represents her biggest directorial challenge. "The piece is incredibly precise in terms of how it's scored," Paulus says, "with live orchestral music combined with electronic samples. In a conventional opera, the score gives the director a road map, but this is like walking on a high wire.

"Meanwhile, the film exists in people's memories – it wasn't a big hit, but among Lynch cult-heads it's often the No 1 film – and I'm having to juggle with what people will bring to the theatre in terms of their memories. I had to find a reason why people would want to see it live, because if you just want the two-dimensional experience, go see the movie."

This determined her set design – a highway cutting right through the audience, who will be seated in the round; a plexiglas box hanging above that highway, representing the house where the central characters live, with an Escher-like staircase descending; and 28 speakers to create a complex sound-system.

"It was actually inspired by Antony Gormley's box with vapour inside, in which you could disappear," Paulus says. "The show is really a private homage to him. It's theatre-as-installation, where the audience is part of the event. Brilliant to do at the Young Vic, impossible to do at the Coliseum."

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